PRESENTATION ON THE STATUS OF THE MLRF TO THE PORTFOLIO COMMITTEE

1. PRESENTATION ON THE STATUS OF THE MLRF TO THE PORTFOLIO COMMITTEE 3 November 2006

2. The Marine Living Resources Fund (MLRF) • The MLRF was established in terms of the Marine Living Resources Act o 1998. • MLRF was listed as a Public Entity in 2001. • The fund generates its income from levies on fish products, license fees and permits, fines and confiscations, harbour fees & transfers from DEAT

3. Figure 1: Sources of Income

4. Income • The largest source of income is levies on fish products (this ranges from R45 000 in 2002 – R75 000 in 2006) • 2006 figure includes old debts paid to avoid penalties on LTRAMP process • 2004/5 figure includes sale of stockpiled fish products, especially abalone

5. Figure 2: Income with DEAT Grant

6. Figure 3: Income without DEAT Grant

7. Income vs Expenditure 2002 - 2006 • The income for the fund exceeds expenditure for the years up to 2006 IF the amounts transferred from DEAT for vessels is included (figure 1) • Figure 2 (income without the DEAT Grants) shows that expenditure has always exceeded income

8. Income vs Expenditure (cont) • Self-generated revenue (excl DEAT transfers) does not cover expenditure • Deployment of compliance vessels meant that operating costs increased by 65% • Vessel costs = 80% of MLRF and 35% if DEAT transfers are included

13. Vessel Operating Costs • The main expense is the operation of the new R500m EPVs commissioned in 2001 • Fuel is the major cost driver = 60% of the vessel operating costs • Fuel increased by 192% over past 4 years (by about R35m) – this could not be recovered from the industry

14. Auditor General’s Comments • In the financial years 2002-2005 and the year ending March 2006 the fund received qualified Reports from the AG with Emphasis of Matter • All the Reports from 2002-5 show the following: • Lack of internal controls • Lack of compliance to the PFMA

15. Auditor General’s Comments (cont) • No proper accounting & fixed asset system • Lack of historical data & supporting documentation • Insufficient control on Debtors & income • Failure to adhere to principles of accrual accounting • Staffing issues

16. Strategies and Way Forward • Finalisation of a cost recovery framework – this will determine the public good that should be funded from Treasury • Appointment of a service provider to maximize revenue collection • Speed up sales of abalone • Treasury has agreed to fund R35m shortfall for vessels in 2006/7 year

17. Strategies and Way Forward (Cont) • Treasury has also agreed to assist with vessel costs over the next 3 financial years • A service provider has been appointed to assist with the development & implementation of a new financial management system. The system will go on trial in November 2006 with full implementation on 1 April 2007.

18. Strategies and Way Forward (Cont) • The development of new policies to deal with: • Revenue and asset management • Debtor management • Vessel management • Levy collection and management – a tender has been awarded to assist with the development of a model to ensure efficient levy collection. This model will be presented in Treasury in February 2007

19. Strategies and Way Forward (Cont) • Marine Activity System (MAST) – this is a consolidated database that will be tested in November and implemented on 1 April 2007 • Additional staff have been appointed in the office of the CFO to deal with financial accounting and supply chain management. Contract staff will also be appointed to assist in data capturing

20. Strategies and Way Forward (Cont) • Capacity building for staff, particularly in the office of the CFO • Training in GAAP • Financial management • Accrual accounting • Management Control of the fund • DG assumed role of Accounting Officer • CFO DEAT assumes Project Manager role

21. THANK YOU